The ruling could be an estimated $150 million windfall for the state, notes Minnesota House Tax Chairman Greg Davids, R-Preston. And the court didn't say whether states could retroactively seek sales taxes.
States that rely more heavily on sales tax - as opposed to personal income tax, for instance - "are the big winners here and could see real budget gains if they follow South Dakota's example", said Fitch Ratings analyst Stephen Walsh. That reduction will be paid for with new money from businesses beyond its borders.
The ruling is a victory for big chains with a presence in many states, since they usually collect sales tax on online purchases already. Chief Justice John Roberts dissented, saying Congress should be the one to decide on the issue.
Retailers with many bricks-and-mortar locations, or larger online retailers with large networks of distribution centers, argued the exemption for companies without a physical location gave online competitors who didn't have to collect taxes an unfair advantage. Marketplace sellers weren't previously required to automatically collect sales tax on their sales, and the ruling may hurt their sales.
"The burden will fall disproportionately on small businesses", he wrote.
Today's ruling caused publicly traded e-commerce companies share prices to tumble, with Shopify, Etsy, Amazon, eBay, Alibaba all recording losses in midday trading on their respective USA exchanges. Online retailers sued over the scheme, and the Supreme Court allowed the case to proceed.
During an interview with FOX Business in April, National Economic Council Director Larry Kudlow suggested that changing the law could level the playing field between traditional and e-commerce retailers.
The ruling puts an end to a legal regime that "distorts free markets and puts local brick-and-mortar stores at a competitive disadvantage with their online-only counterparts", said Deborah White, general counsel of the Retail Industry Leaders' Association. But he said he's concerned that it will create a complex web of online sales rules that could prompt some businesses to relocate.
The Trump administration had urged the justices to side with South Dakota.
The online stores have contended that charging sales tax would be "burdensome" for small- to mid-sized shops.
It also should be noted that those taxes are typically built into the advertised price, so consumers would see the difference before the checkout screen, whereas sales tax is added on.
Only five states do not have a state-wide sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. In South Dakota alone, a state with a population of less than 1 million people, The Department of Revenue estimates that the state government could take in up to $58 million annually.
"I imagine most states will adjust their laws", Joseph Bishop-Henchman, executive VP at Tax Foundation, told CNNMoney.
The ruling, in Wayfair v.
The 5-to-4 decision overturned a 1992 decision, Quill vs. North Dakota - was "flawed on its own terms" and was especially problematic due to the rise of internet retail.
Justice Anthony Kennedy wrote the court's past precedent - requiring only retailers with a physical presence in a state to collect state sales taxes - was not only wrong, but also increasingly unworkable in an internet age.
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